In the eyes of the law, it's a private sale (from you to the dealer) – so it's 'sold as seen' and the dealer will have no comeback. That's assuming you haven't deliberately misled the dealer – i.e. by saying it drives without fault when it clearly has an issue. Morally, you might feel better about telling the dealer, and you might get a more positive response if you have to book your new car in for warranty work further down the line (although, as you're buying it from a dealer, you have more rights than he does). Is the car you're trading in the kind of car that the dealer will want on his forecourt? If not, it's probably going straight to auction and he won't be fussed about any faults (although will use it as a reason to chip you on price if you tell him). Ultimately, it's a moral decision.